September buying advice: Move-up buyers needn't wait
Another month of economic bad news is taking its toll on the housing market. That can be good news or bad news for homebuyers, depending on who – and where – they are.
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Wild stock-market swings, slumping sales and prices and renewed concerns about the stability of the U.S. economy are giving more homebuyers the jitters.
In recent weeks, applications for mortgage purchases dropped to the lowest level seen since December 1996, according to the Mortgage Bankers Association. Is it time to hit pause on your search? Or, with rock-bottom interest rates and values pushed back to last decade's levels, will a purchase now have you patting yourself on the back in a few years?
We'll ask the experts what they think about the economy's sour state and its effect on the housing market. We'll also review the latest housing stats and consider the merits of a home warranty.
Is there a case for cold feet?
The dire headlines of the past month have pushed consumer confidence to some of the lowest levels since the recession. But what does all this volatility in the stock market and economy mean for buyers, outside of low morale? That depends on how long it lasts, experts say.
If these economic woes continue with no improvement for months, that could push home prices down lower than predicted, says Stan Humphries, Zillow.com's chief economist.
"The longer it drags on, the more impact (this turmoil) will have on the housing market," Humphries says.
However, if employment continues to solidify and the market continues its slow but shaky recovery, the U.S. housing market could hit bottom by the end of next year and start slowly inching up again in 2013, says Ingo Winzer, president of forecasting firm Local Market Monitor.
Some markets in Texas, Southern California and parts of the Midwest could emerge more quickly. The U.S. debt downgrade, however, could further slow the recovery in markets with a high number of public-sector jobs, such as Sacramento, Calif., and Austin, Texas, Winzer says.
"Overall, the recent economic information doesn't change our forecast a whole lot," Winzer says. "We had already been expecting a very slow recovery."
Prices are definitely falling at a much slower rate, edging down just 0.4% between the first and second quarter of this year – the smallest decline in more than four years, according to Zillow's Real Estate Market Report.
The key to a sustainable housing recovery is jobs, experts say. A weak stock market may keep some people with significant money in equities from moving, but the real deciding factor for most people is whether or not the household is fully employed.
One bright spot: This economic volatility should keep interest rates, now hovering close to 4%, at historically low levels for the near future, making that home purchase more affordable.
Humphries says there's really one overriding factor in whether or not buyers should pull the trigger on a home purchase, and that's how long they plan to stay in the house. (Of course, they'll also need to be creditworthy enough to obtain financing.)
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If you're going to be in the house for five years, Humphries says, you may experience some depreciation in the near term, with slight gains toward the end of that term.
First-time homebuyers stand to gain the most from waiting, as they might be able to buy a home for a slightly lower price six to nine months from now.
Move-up buyers, however, don't have as much incentive to wait, as they will see depreciation on the home they are selling as well as on the house they are buying.
Still, with rental rates rising in many cities, buying will become more of an attractive option for many people who have enough money saved for a down payment.
Buying a home (at median list price) was cheaper than renting the median two-bedroom apartment or condominium unit in 74% of the major U.S. cities that real-estate search site Trulia surveyed in its recent Rent vs. Buy Index.
So many homes to buy, but getting the home to appraise high enough is the problem in order to get a loan.
I still believe in living beneath your means. My house is too small, but the payments are very low since we bought 15yrs ago. Just because you can afford the nicer home, car or whatever, doesn't mean you should spend that money. The bottom could fall out at anytime, and if that happens isn't it easier to sleep at night, knowing that you would still be able to keep your home? I would still choose buying over renting...but big ,fancy house?? (insert amount here) peace of mind? Priceless
zillow...they go to zillow for expert opinion?
they sell nothing but ad space, market nothing but their lame web site
that does nothing but gather trivial recorded info and lump it into a generic opinion of value...
...so they can sell more ad space.
ONLY WAY OUT OF THIS ONE IS INFLATION... INVESTORS WILL BE LOSING
MONEY ALL THE WAY UNTIL FOLKS START TO LIVE MORE FRUGALLY AND NOT USING
THERE HOMES AS ATM MACHINES AND REFINANCING NEVER HAVING TO OWN OR PAY BACK .. RESCUED AT THE END BY A REVERSE MORTGAGE OVER INFLATED BY APPRAISERS.. IT IS STILL GOING ON..
THAT SAID; OWNING IS A HEDGE ON INFLATION RATHER THEN HAVING CASH IF YOU ARE JUST GETTING IN.. PEOPLE NEVER HAVING TO PAY BACK LOANS LIKE OUR COUNTRY SEEMS TO HAVE NO INTENTION TO PAY BACK OUR LOANS IS A MAJOR MAJOR ISSUE GOING FORWARD FOR OUR WORLD.
"all the wealthy investors pulled out their money from the stock market and housing market the second Obama become president. No wealthy white man will invest his money while a black man is president."
How do you figure that investments went down the second Obama took office? The Dow Jones was at 7949 the day Bush left office and the day Obama took office. The Dow is near 11,000 now. My math says the Dow is up almost 40% since Obama took office. That may not be because of his policies but it definately doesn't mean investors cut and run.
Buy a home when you start to see the economy change and home prices start to go up. That of course, means the bottom has been realized and you are getting your home for the lowest price. When will that happen? Not in my lifetime, that's for sure.
You want to change things in this country? Start paying the people that have a job a decent wage!!!! There are millions and millions of them, and thanks to the distribution of wealth in America, they can't afford a home, a new car, or anything else that will spark the economy.
That one simple change will create more jobs than all the fake money the politicians pour into the stagnant economic situation.
It's not that complicated people. The greed at the top just wants you to think it is.